“There's a battle to be fought and a battle to be won,” he said.

Stack of Letters from Congress Grows; CMS' Weems Writes Back to Rep. Altmire
WASHINGTON--Joining the growing numbers of those voicing major reservations about DMEPOS competitive bidding, over the last 10 days, three senators and four representatives have called on CMS to postpone further implementation of the program.

In an April 1 letter to Michael Leavitt, secretary of the U.S. Department of Health and Human Services, which oversees CMS, Sen. Sherrod Brown, D-Ohio, called competitive bidding “seriously flawed” and said it would undermine beneficiary access and care.

In bullet-item format, he noted numerous problems with the program and urged HHS to “act quickly to fix the problems … and avert the serious ramifications--both for Medicare beneficiaries and suppliers--that will surely result should implementation continue unfettered.”

On April 2, Sens. Arlen Specter, R-Pa., and Robert Casey, D-Pa., sent a letter to Leavitt asking him to extend the winning bidder contract review period (which ended April 3) and to delay implementation of round one.

“The delays we request are clearly warranted by the very serious potential errors made by CMS and the CBIC in this process,” the senators wrote. “If a large number of bidders have been disqualified in error, it is entirely likely that their re-inclusion may substantially impact the bid outcomes. Thus, it is imperative the current schedule be delayed so that all necessary corrections can be implemented.”

On March 28, Rep. Ric Keller, R-Fla., sent a letter to acting CMS Administrator Kerry Weems telling the CMS head he had discussed the issue of bid disqualifications with several providers.

“The business owners I met with indicated that 40 percent to 70 percent of their business is generated from Medicare beneficiaries. Their ineligibility to participate in the DMEPOS program will negatively affect their businesses as a result of clerical errors made by CMS. It will also cause beneficiaries to lose the quality service they have come to expect from these providers as well as their choice when seeking out medical equipment,” Keller wrote.

Three other Republican representatives from Florida--Lincoln Diaz-Balart, Mario Diaz-Blart and Ileana Ros-Lehtinen--sent a similar letter to Weems on April 3.

The members of Congress are the latest in a widening spectrum of those opposing the project, which is set to take effect July 1. But theirs weren't the only letters posted last week.

Earlier last month, Rep. Jason Altmire, R-Pa., spearheaded a letter to Weems from 120 House members asking CMS to “provide detailed answers” to a number of questions about round one of bidding and expressing concern about round two because “CMS is expanding the program before the first phase has started and the impact on beneficiaries' access to DMEPOS can be evaluated.”

The House letter recommended that CMS create additional measures to ensure “the healthy participation of small businesses” in both rounds.

In a response received last week, Weems wrote Altmire that CMS had initiated “a number of policies to ensure the active participation by small suppliers,” including:

--Working with the Small Business Administration to establish a new definition for small suppliers reflective of the DMEPOS industry;
--Not requiring suppliers to submit bids for all product categories because it may be difficult for small suppliers to furnish all of the product categories in the competitive bidding program;
--Setting a 30 percent target for contract awards to small suppliers for each product category; and
--Permitting small suppliers to form networks if they cannot service an entire competitive bid area.

“In addition to the regulatory provisions, we provided extensive education and support to all suppliers including small suppliers, during the bidding process,” Weems said in his letter, adding that CMS had more than doubled its target goal with small suppliers making up “a significant number (64 percent) of the suppliers being offered contracts under round one of the program.”

Regarding the timeline for round two, Weems wrote: “As we proceed with each stage of round two, we are taking into account our experience from round one, as well as the successful demonstration projects conducted several years ago. For example, we announced the metropolitan statistical areas and product categories that will be phased in under round two of the program earlier this year so that suppliers in those areas would have time to meet quality standards and become accredited. We are also upgrading the online supplier bidding system.”

Said Weems, “I assure you that I will continue to take steps to work with suppliers to ensure that Medicare beneficiaries have access to quality DMEPOS items and services at reasonable prices.”

What Exactly Does That 64 Percent Mean?
ATLANTA--According to Dave McCausland, CMS' recent announcement that 64 percent of the contract winners in round one of competitive bidding are small providers “may fall under the category of 'statistics can prove anything.'”

“Does it really matter that small providers were offered 64 percent of the contracts in the first 10 metropolitan areas when the total number of contracts offered--1,335--was only 14 percent of what CMS had originally forecast they would offer in the Final Rule--9,854?” McCausland questioned.

Senior vice president of planning and government affairs for The Roho Group, Belleville, Ill., McCausland compared the round one contract figures--posted March 28 on the CBIC Web site--to the Regulatory Impact Analysis section of the Final Rule on competitive bidding, published April 2, 2007. He offered the following excerpts from the rule:

--“We estimate that 28,960 suppliers will provide competitive bid items in the CBAs that we initially designate. If suppliers furnish products in more than one MSA, we counted them more than once because they are affected in more than one MSA ... we estimate that 68 percent of suppliers will furnish products subject to competitive bidding and will be affected by competitive bidding during the initial round of competitive bidding.”
--“We also estimate that approximately 85 percent of registered DMEPOS suppliers are considered small according to the [Small Business Administration] definition.”
--“We also assume, based on the results of the demonstration, that at least 60 percent of bidding suppliers will be selected as winners in at least one product category.”

Calculations based on this and other data in the rule, McCausland said, show that of 19,720 estimated total providers furnishing bid items in the first 10 bid areas, some 16,762 (85 percent) are small providers. Of those, only 854 were offered contracts (64 percent of 1,335). That means about 5 percent of the number CMS originally estimated as small providers affected in round one were offered a contract.

“Why were CMS' estimates in the Final Rule so overstated?” McCausland asked. “What happened?”

For McCausland's in-depth look at the "alleged benefits" and "likely outcomes" of competitive bidding and the statistics that go with it, check the upcoming April issue of HomeCare.

Complex Rehab Stakeholders: 'It's Bad'
ATLANTA--The industry is reeling from the across-the-board cuts set in round one of competitive bidding, but nowhere is this more true than in the complex rehab sector.

Averaging 15 percent of current reimbursements, the reductions, coupled with the scant number of contracts offered in the product category, were shocking to members of the rehab community, which has been fighting--thus far unsuccessfully--to have complex rehab equipment excluded from the bidding program.

“I don't like the reimbursement numbers I am seeing,” said Gary Gilberti, vice president of the National Coalition for Assistive and Rehab Technology. “It's tight already; we have companies that are barely making it on current allowables. I think a lot of people bid out of fear. I think they bid low to try to keep their share of the market.”

Gilberti, president and CEO of Chesapeake Rehab Equipment, Baltimore, said his company won its bid in Charlotte, N.C., but lost in the Pittsburgh CBA.

“And I am glad I didn't bid in some of the other markets, considering how low those numbers are,” he said.

Tim Pederson, CEO of WestMed Rehab in Rapid City, S.D., agreed that the numbers are surprisingly low, especially since, he said, “it's completely inappropriate to competitively bid complex rehab at all.”

“It's bad,” said Pederson, who also serves as chair of the American Association for Homecare's Rehab and Assistive Technology Council. “Anytime you have reimbursement reductions of that magnitude, it's bad, because our profit margins are already so thin.”

Competitive bidding for complex rehab, Pederson argues, could ultimately result in tragedy.

“I think, just as I have thought for the past couple of years, that we probably won't have any real change in the [competitive bidding] program until we have a catastrophe. [CMS is] trying to see how low they can set the bar before they have a tragedy,” he said.

In addition to the round one reimbursement rates, many are also concerned that only five or six companies were selected as bid winners in five of the 10 bid areas. This means that, come July 1, some bid winners will be responsible for providing equipment and services for up to 20 percent of those MSAs.

Sharon Hildebrandt, NCART executive director, called the bid program “a disaster.”

“I see this as a disaster for consumers of complex rehab because in many of the markets, many inexperienced suppliers are being offered a contract,” she said. “They do not know the different types of technology needed for complex rehab clients, nor do they know or understand the disease progression in the disabilities.

“They were awarded the contracts because they bid low. They bid low because they don't know what their costs are. They just wanted the business,” she said.

Hildebrandt also voiced concerns over how repairs will be handled. CMS is not requiring those who win contracts to provide repairs, she said, “so repairs are going to be done by providers who did not win bids, and those providers are not going to be willing to provide repairs at less than cost … The consumers are going to be the ones who are going to be the big losers.”

In analyzing the problems concerning competitive bidding and complex rehab, Rita Hostak, NCART president and vice president of government relations for Sunrise Medical, Longmont, Colo., offered the following list of complaints:

--There are many reports of experienced rehab suppliers being disqualified due to bid amounts that someone judged to be too low. The irony is that many single payment amounts for items in category 3 are below supplier acquisition cost, so, these decisions appear to be arbitrary. The lack of judicial recourse is causing tremendous concern for these suppliers and the Medicare beneficiaries they serve.

--The fact that capacity was a key determining factor in the number of suppliers whose bids would be included in the development of the single payment amount is a significant concern. The suppliers are not in any way committed to their claimed capacity and yet, it eliminated other suppliers from the program that bid within pennies of the winning suppliers. This certainly gave competitors an opportunity to block out their competition.

--[There are] reports of a high number of winning suppliers in the complex rehab category that have little or no experience with these products or the individuals that require them. The fact that these suppliers would not intuitively understand the product or service costs related to this category would cause them to naively bid lower, therefore, blocking out more experienced and knowledgeable suppliers. The ultimate result will be that these knowledgeable suppliers could be forced to close their doors or sell their business to winning suppliers. Suppliers that are solely dedicated to providing complex rehab technology cannot survive a 30 percent or higher loss of revenue and sustain their business.

--The differences from CBA to CBA in the single payment amount cannot be accounted for in service cost differences. It appears that the experience of the supplier in terms of providing truly complex equipment may be the single most variance to cause this pricing difference. If a supplier does not recognize the broad range of technology that fits a single HCPCS code and the fact that consumers with severe physical disabilities often require a specific product within a code--meaning products within HCPCS codes are not interchangeable--the supplier could naively bid based a single low cost product within a code assuming that they can provide that product to anyone needing a product within that code. The problem that results is either the supplier begins to see that he cannot afford to provide the appropriate products at the single payment amount and drops out of the program (this is the unlikely scenario--after all, it is the supplier's livelihood) or the consumer no longer receives the appropriate device.

--Innovation in technology to improve people's lives will no longer be a viable option for manufacturers of products in the bid categories; the new goal will only be to reduce costs. Products will be de-featured, and manufacturing jobs will move overseas at a faster pace.

--Suppliers obviously analyzed utilization data, their own as well as CMS', and the weighting assigned to each HCPCS code in the bid request to help them determine their bid prices and to raise their chances of being a contracted supplier. The result is that repairs for beneficiary-owned equipment will be more difficult than ever to obtain. In several CBAs, the new single payment amounts on power wheelchair parts are actually below supplier acquisition cost. Whether suppliers did this purely on the basis of utilization and believing that the level of pricing would result in a composite bid that would place them in the winning array, or whether they also remembered that the Final Rule indicates that contracted suppliers are not required to repair beneficiary-owned equipment, is unknown. Regardless of what motivated the low bid prices, the result is that Medicare beneficiaries will most likely end up paying for repairs out-of-pocket.

--The fact that CMS did not require a bidding supplier to have a physical location in the CBA will cause problems for beneficiaries requiring complex rehab. To provide complex rehab, the [Assistive Technology Supplier] needs local support. They require demo equipment, simulation equipment. Meeting the medical and functional needs of an individual with severe disabilities is not accomplished with out-of-the-box technologies. [Often], a mobility system will require multiple fittings and may have to be delivered twice, once to the hospital so the evaluating therapist can assess whether the product ultimately meets the individual's needs, and again to the individual's home. This level of service is difficult to provide in a timely manner if the office is hundreds of miles away.

Seth Johnson, vice president of government affairs for Pride Mobility Products, Exeter, Pa., echoed concerns over winning bidders that may have no experience in the complex rehab market. He also raised questions as to the numbers behind CMS' selections in certain MSAs.

“The program should not go forward until these significant issues are resolved and more transparency is provided on the detailed calculations behind the establishment of the payment rates. Within the complex rehab category, for example, it is highly improbable that Cincinnati would have a straight 20 percent cut across all base codes,” Johnson said.

“The reductions in the Dallas, Miami and Riverside competitive bid areas are also questionable for the same reason, which raises issues with CMS' application of the required methodology to develop the payment amounts in the CBAs. When you look at the formula that CMS/CBIC were to follow, which is outlined in the Final Rule, such outcomes seem highly improbable.”

So what can complex rehab providers do?

For those preparing to bid in round two, Gilberti advised, “Know your costs … because right now we are doing nothing but damaging the market with these lowball prices.”

To access CMS' single payment amount charts for complex rehab and all product categories in round one, click here.

Round One Costs, Errors, Transition Get Attention at Open Door
BALTIMORE--Last Wednesday's Open Door Forum started out as same ol', same ol'--reemphasis on accreditation deadlines and basic information on competitive bidding--but when CMS officials began fielding questions from the teleconference's more than 400 listeners, things got a bit more interesting.

Eric Sokol, executive director of the Power Mobility Coalition, pulled no punches when he asked if CMS' touted $1 billion savings from competitive bidding had taken into account the administrative cost to implement the program.

Citing costs including hiring the CBIC, convening meetings of the Program Advisory and Oversight Committee, numerous “man-hours” spent pouring over files and the amount of resources devoted to educational outreach, Sokol asked if the $1 billion was “above and beyond all that investment.”

“We would have to check into that” was the answer CMS gave Sokol.

Marcia Nusgart, representing the Coalition of Enteral Nutrition Manufacturers, received a more direct answer--well, sort of--when she asked whether there would be a “grace period” for enteral nutrition suppliers who did not win a bid before the round one implementation date of July 1.

“The contract offers were sent out [March 20 and received on March 21], so if you're a skilled nursing facility or an enteral nutrition supplier … you can start planning and preparing based on that information,” CMS answered. “The law requires [a] contract for furnishing items under Part B, so once those contracts are in effect, only the contract suppliers can furnish those items that are paid for under Part B.”

One provider called in to ask what steps round one providers who feel their bids were denied due to CMS' error should take to rectify the situation.

CMS' Joel Kaiser answered that there is a process in place for providers to voice their grievances. “The supplier can contact a customer service representative at CBIC and get more detailed information on the reasons their bid was excluded, and then, based on that information they can request that there be further research into the specific information surrounding their bid,” Kaiser said.

Once the CBIC is done with the review process, “then they'll be reporting to us, and CMS will work with the CBIC to further review the bid situation,” he continued. “And then, ultimately, we will be replying back to the bidder on the outcome of the review.”

Kaiser went on to say that the case-by-case review could take up to 30 days, after which time CMS would give “further information as to what the next steps are.”

The caller then asked how the transition for round one providers would be handled in terms of time frame and coordination. “It's not finalized yet. I can't give you specific details. There will be specific guidance provided in the near future on exactly what that process will involve,” Kaiser said, although he did note there could be instances of “crossover” of providers involving rental equipment for which Medicare had already paid through a certain month.

The answer remained the same--“It's not finalized yet. I can't give you specific details”--when the same caller asked whether patients would be assigned to new providers or how that transfer would happen in the 10 bid areas. “We've laid out a plan and a process,” Kaiser said, “... but it could change.”

An “intense” education campaign for all affected participants of the bidding program will be instituted before the July 1 start date, Kaiser said. The campaign will include a series of “MLN Matters” articles and conference calls for providers, according to CMS.

On further questions concerning specifics of bids in round one, CMS said it would refrain from answering until after all contracts were signed. That deadline was April 3, and Kaiser said the agency is on track to announce the round one winners in May.

CMS continued to direct questions concerning competitive bidding to the CBIC Web site at www.dmecompetitivebid.com.

Agency officials also made the following points during the Open Door:

--Suppliers planning to bid in round two must be accredited or pending accreditation by May 14, 2008, to submit a bid. Suppliers must complete the accreditation process by Oct, 31, 2008, to be awarded a contract.
--CMS has released a revised Advanced Beneficiary Notice form. Suppliers have a six-month transition period to begin using the revised form and will be required to use it by Sept. 1, 2008.

The next Open Door call is scheduled for Wednesday, May 14, 2008.

New Provider Group Forms
MIAMI--Competitive bidding has thrown HME into a veritable hurricane of activity--and, amid appeals to CMS, letters to Congress and preliminary moves by various industry groups toward legal action, a new organization has also come on the scene.

Provider Rob Brant of City Medical Services in North Miami Beach, Fla., said he started AMEPA--Accredited Medical Equipment Providers of America--just last week “to unify the accredited medical equipment providers.”

Brant, a member of VGM and former board member of the Florida Association of Medical Equipment Services, said the group plans to reach out specifically to those providers who are accredited or who plan to become accredited to help them through competitive bidding.

“It is created by accredited providers for current and future accredited providers,” Brant said.

AMEPA, which will hold its first meeting for members in Ft. Lauderdale, Fla., on Thursday, will focus on educating providers on different aspects of accreditation as well as on topics like how to contact their congressmen, Brant said.

“I have spoken with many accredited providers and they said that they don't belong to any [HME] organizations or go to any of the trade shows,” Brant said. Of the providers he interviewed, Brand said, most “had no idea who their congressmen are. We are teaching them how to contact their legislators and to be involved. I think that's one of the problems we have had in the industry.”

AMEPA's board includes Jack Marquez, vice president of Cobra Medical, Miami; Jeff Rittenberg, CEO of Surf Med, Miami; Zane Morgan of Morgan and Associates; Ron Jenkins, owner of Respitec, Orlando, Fla.; Ray Ferri of Metroplex Medical Services; and Javier Talamo of Hialeah, Fla., law firm Kravitz & Talamo.

Brant said the group is already active and has garnered letters from members of Congress including Florida Republicans Ric Keller, Lincoln Diaz-Balart, Mario Diaz-Balart and Ileana Ros-Lehtinen requesting that CMS stop the competitive bidding process. (See related story this issue.)

“[AMEPA is] going to be a united voice for the accredited DME owner … in less than one week we have assembled four letters [from members of Congress] asking to stop competitive bidding,” Brant said.

In addition to Miami, Brant said AMEPA has members in Orlando, Fla., and Dallas, Texas, and meetings will also be held in those cities.

For additional information, Brant may be contacted at rob@citymedical.com.


HME Company Newswire
Amerita, Irvine, Calif., has acquired IV Solutions, one of the largest independent infusion pharmacies in Nashville, Tenn. This marks Amerita's sixth acquisition in two years and continues the company's strategy to expand its presence in the Southeast.

Breathe Technologies, Fremont, Calif., said it has closed on $15 million in its second round of venture funding. The investment was led by Kleiner Perkins Caufield & Byers with participation from existing venture investors including Synergy Partners International, Delphi Ventures and Life Science Angels. The company is developing a family of compact, ultra-lightweight, ambulatory respiratory ventilator systems for the hospital, home care and pandemic markets. Annual worldwide sales of conventional respiratory systems that the company's products could enhance or replace are estimated at more than $2 billion, according to a press release.

Cardinal Health, Yorba Linda, Calif., has signed an exclusive distribution agreement with SleepNet Corp., a manufacturer of gel masks for sleep apnea patients, for distribution of its products throughout the Americas. Under the agreement, Cardinal Health will distribute SleepNet's IQ, Phantom and MiniMe nasal masks and Mojo full face masks.

Harmar Mobility, Sarasota, Fla., has announced its acquisition of Summit Lifts. A manufacturer of stairway lifts based in Lake Winnebago, Mo., Summit will serve as the capstone of Harmar's home accessibility products line, which already includes vertical platform lifts and bath lifts. Harmar said the company is confident Summit's products will fill a need for providers who are looking for cash-sale products. Both the Harmar and Summit brand names will continue to be utilized.

Invacare, Elyria, Ohio, will market and sell a software system from Thousand Oaks, Calif.-based Bonafide Management Systems to “help customers enhance their profitability and competitive edge,“ the manufacturer said last week. “Leveraging the most advanced business management tools is key,” David Kazan, vice president of sales and marketing for Invacare's Service Business Group, said in a press release. Bonafide bills and files claims electronically with Medicare and other payers and also offers inventory control and customer management in a Web-based system.

Nissin Wheelchairs, Torrance, Calif., and Colours 'N Motion, Corona, Calif., have formed a new organization to provide mobility products. To begin this project, Nissin Medical Industries Co., the Japanese parent company of Nissin USA, purchased 100 percent of Colours 'N Motion as of March 18. Nissin Wheelchairs will continue to be available, and the new business will be run under the umbrella of Colours 'N Motion. Both Colours and Nissin products will be available from the current Colours 'N Motion Corona, Calif., office as of April 1. Takahiro Haruyama will serve as CEO, and John Box will continue in his current position as Colours president.

Connecticut's Peoples Medical, an independent, full-service HME, has opened its newest location in New Haven across from Saint Raphael's Hospital. Founded in 1996, Peoples Medical has an 8,000-square-foot showroom and pharmacy at its North Haven location, a showroom on York Street in New Haven and a Farmington location. The company's staff includes respiratory therapists, pharmacists, mobility specialists, physical therapists and medical equipment specialists.

San Diego-based SeQual Technologies has implemented an Internet dealer policy that addresses the suggested advertised price of its products via the Internet, newspaper, radio and television--any places where end users can see an advertised price, the company said last week. Implemented in December, the policy “was something we needed to do because of all the debates that have been ongoing, all the cuts in reimbursement and how transparent the Internet has made pricing,” said Ron Richard, senior vice president of sales and marketing. The policy also requires providers to offer a service plan to their patients to ensure end users get quality maintenance. “Manufacturers are going to be challenged in the future by having to deal more and more with patients, particularly on the service side,” said Richard.